The jobs report did not put to rest fears of loss of momentum in the U.S. economy, though the market doesn’t seem to be overly concerned, at least going by the pre-open sentiment. Perhaps investors see a Fed silver lining to this report or may be they are going with the ‘weather explanation’.
The ‘headline’ jobs tally of +113K came short of expectations by a wide margin, the second month in a row of sub-par labor market showing. Disappointingly, we didn’t get much revision to the December number that many were looking for (December’s +74K tally now rose only +75K). The private sector added +142K jobs in January vs. +89K in December and November’s +272K tally.
The unemployment rate ticked down, with a modest pick-up in the participation rate more than getting offset by stronger gains in the household survey (the unemployment rate comes out of the household survey, while the jobs tally comes out of the establishment survey). The unemployment rate has now dropped by 0.6% since October 2013, an unusually fast decline rate for this key measure.
The report shows the construction and manufacturing sectors adding jobs during the month, which run counter to what we saw in the ISM index and weather playing a role in this report. Construction added +48K jobs in January after the -22K loss in December, with gains on both the residential and non-residential sides. Manufacturing jobs were up +21K in January vs. +8K in December and +35K in November. This report is showing acceleration in manufacturing jobs in January from the prior month, contrary to what the employment sub-index of the ISM survey showed on Monday.
Coming after the weak ISM and Durable Goods readings, today’s report keeps alive questions about the U.S. economic outlook. Weather has been unusually erratic this year, but it’s hard to tell at this stage whether the soft data is due to weather-related distortions or there is real loss of momentum in the economy. Since weather hasn’t improved in any meaningful way in February either, we will likely to have to wait for some time before this issue gets definitely resolved.
Sheraz Mian
Director of Research
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